Dubai Mercantile Aims to Tap Gulf Markets to Fund Oil Trading

The Dubai Mercantile Exchange’s new
chief executive officer said he aims to tap Persian Gulf
financial markets and banks for capital to help fund and expand
trading in crude oil and refined products.

Christopher Fix, a former BNP Paribas SA executive who
joined the DME last month, said the exchange has spoken with
“half a dozen” regional lenders about ways to facilitate
funding for energy trading. The aim is “to get Arab banks to
finance Arab oil,” he said at an energy forum in Dubai today.

The DME, the platform for trading in the Oman crude futures
contract, does about $1.5 billion in oil transactions a month,
mainly financed by European or U.S. lenders, Fix said. European
and U.S. banks tightened lending after the global financial
crisis, adding to constraints on some trading companies at the
same time as higher commodity prices made it more expensive to
purchase oil and refined products.

Trading in Oman futures started in 2007 and monthly
transactions on the exchange set the official price from Omani
crude exports. Dubai, the second-biggest sheikhdom in the United
Arab Emirates, began using the contract as a benchmark for its
oil in 2009. The more popular standard for Middle Eastern crude
is the Dubai price assessment published by Platts, an energy-
information division of McGraw-Hill Cos.

While the DME still aims to have the Oman futures contract
adopted by other Middle Eastern oil producers, Fix said the
exchange was making a “massive change of strategy.” To boost
trading volume, the DME will improve the trading platform to
attract more market participants like refiners and other buyers,
rather than relying on its as a benchmark by producers, Fix
said.